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Payrolls in U.S. Rise 165,000 as Unemployment Rate Drops

A job seeker talks with a recruiter at the Spring LGBT Career Fair in San Francisco, California, U.S., on Wednesday, April 24, 2013. Photographer: David Paul Morris/Bloomberg

May 3 (Bloomberg) -- American employers took on more
workers than forecast in April and the jobless rate unexpectedly
fell to a four-year low of 7.5 percent, reflecting confidence in
the outlook for the world’s biggest economy.

Payrolls expanded by 165,000 following a revised 138,000
increase in March that was larger than first estimated, Labor
Department figures showed today in Washington. Revisions added a
total of 114,000 jobs to the counts for February and March.

Stocks rallied, sending the Dow Jones Industrial Average
briefly above 15,000 for the first time, as the report bolstered
expectations that the almost four-year economic expansion will
overcome a second-quarter slowdown. Hiring advanced even as
employers witnessed the onset of planned government spending
reductions that the Federal Reserve said are hindering growth.

“The U.S. labor market is not looking as bad as was
feared,” said Aneta Markowska, chief U.S. economist at Societe
Generale in New York, who correctly projected the jobless rate.
“Businesses obviously cut very sharply during the recession and
now that revenues are growing, they have to add to headcounts.
If we do see some improvement in demand in the second half of
the year, which I expect to happen, that will lead quickly to
additional job creation.”

The Dow advanced 142 points, or 1 percent, to 14,973.96 at
the close in New York. The Standard & Poor’s 500 Index rose 1.1
percent to 1,614.42. The yield on the benchmark 10-year Treasury
note jumped to 1.74 percent from 1.63 late yesterday.

Economists’ Forecasts

The median payrolls forecast of 90 economists surveyed by
Bloomberg was for a 140,000 advance. Projections ranged from
gains of 100,000 to 238,000 following an initially reported
88,000 increase in March.

The difference between today’s unemployment-rate outcome
and the average estimate of economists surveyed by Bloomberg was
1.8 times larger than the poll’s standard deviation, or the
average divergence between what each economist forecast and the
mean. The payrolls figure was 1 time larger.

The contract on the S&P 500 Index expiring in June climbed
0.6 percent in the first five minutes after the figures were
released at 8:30 a.m., while the U.S. dollar rose 0.4 percent
against the euro.

Labor-market gains in the U.S. contrast with weakness in
Europe, where a report today showed that the euro-area economy
will shrink more than previously estimated in 2013 as part of a
two-year slump that has pushed up unemployment to a record.

European Economy

Gross domestic product in the 17-nation currency bloc will
fall 0.4 percent this year, compared with a February prediction
of 0.3 percent, the European Commission said. This follows a 0.6
percent contraction in 2012.

In the U.S., the job market is picking up for experienced
workers, said Mike McNamara, 30, who just landed a new position
in Chicago. The former advertising firm manager’s two-month
search resulted in five interviews and two offers before he
accepted a job as a projects manager at ShopperTrak, a data
tracker for the retail industry. He’ll start later this month at
a pay about 60 percent higher than his prior job.

“It is really amazing the amount of opportunities,” said
McNamara, who was brought aboard by Harvey Nash Group Plc, an
executive recruiter. “There is a lot more interest than two
years ago” during his last search. “From an employment
standpoint, the economy seems to be picking up.”

Even as payrolls exceeded expectations, a report from the
Institute for Supply Management today underscored forecasts for
slower economic growth in the second quarter.

Service Industries

The Tempe, Arizona-based institute’s non-manufacturing
index declined to 53.1 last month from 54.4 in March. The median
forecast in a Bloomberg survey called for a decline to 54. A
reading above 50 indicates expansion in the industries that make
up almost 90 percent of the economy.

Economic growth will cool to a 1.5 percent annualized pace
in the second quarter after growing at a 2.5 percent pace in the
prior three months, according to a Bloomberg survey of
economists from April 5 to April 9.

“We don’t expect the summer swoon talk to go away,” Chris
Rupkey, chief financial economist at Bank of Tokyo Mitsubishi-UFJ Ltd. in New York, said in an e-mail. “But for today the
labor market is holding its own -- Washington has not sent the
economy off the rails yet.”

Strength in private employment more than offset a decline
in government, the Labor Department report showed. Private
payrolls increased by 176,000 in April after a revised gain of
154,000 the previous month. Government employment dropped by
11,000.

Domino’s Pizza

Companies like Domino’s Pizza Inc. have indicated they
still see strong enough demand to justify increasing their
headcounts. The Ann Arbor, Michigan-based pizza chain reported
sales at stores open at least 12 months increased in the first
quarter by more than 6 percent from a year earlier.

“We’re absolutely hiring right now,” Chief Executive
Officer Patrick Doyle said during a May 1 interview on Bloomberg
Television. He said “a more comfortable consumer” is driving
demand and allowing his business to expand. “Just in the U.S.,
with 5,000 stores, we could easily hire 10,000 people today.”

Industries adding jobs included leisure and hospitality,
including a 38,000 jump at restaurants and bars, today’s report
showed. Retail trade and education and health services also
increased headcounts.

A drop in the workweek took some of the shine off the
positive news on the payroll front. Employees worked 34 hours
and 24 minutes a week in March on average, down 12 minutes from
the prior month and the fewest since January. The decrease may
be another sign the economy is slowing this quarter.

Part-Time Employment

The pullback in the workweek may also be reflected in an
increase in part-time employment. The number of employees not
toiling a full week rose to 27.5 million from 27.4 million. Some
223,000 more people said they were working part-time because of
economic slack last month.

Today’s employment report also showed average hourly
earnings rose 1.9 percent from a year earlier to $23.87.

The jobless rate dropped from 7.6 percent in March,
indicating that most of the 210,000 new entrants to the labor
force found employment. The rate, which is derived from a
separate poll of households, was forecast to be unchanged,
according to the Bloomberg survey median.

For Chuck Aldrich of Clarion, Iowa, the job search has had
its ups and downs. Aldrich, 55, builds corn sprayers for Hagie
Manufacturing Co. in Clarion. He was a construction site flagman
in 2010, a job he described as “sporadic.”

Jobless Benefits

After several other gigs that included a position that
ended when the employer downsized, Aldrich began collecting
unemployment benefits last year and enrolled in a class that
complemented his engineering degree. That led to his current job
at Hagie.

“It’s a lot easier with the money coming in,” said
Aldrich, who is buying a new house because of his income gains.
“I don’t have to watch my spending quite as tightly.”

Temporary-help services added 30,800 workers to payrolls in
April, the most since February 2012.

“Hiring temporary workers is one way to be careful” in an
uncertain business environment, John Challenger, chief executive
officer of Challenger Gray & Christmas Inc., a Chicago-based
employment consulting firm, said in a Bloomberg Television
interview with Tom Keene.

Employers “want workforce flexibility to manage peaks and
valleys of the industry cycle,” David Barfield, chief executive
officer of Bartech Group Inc., a staffing company based in
Livonia, Michigan. “Temporary labor gives you fast access to
skilled workers.” He said automakers are “among the most
aggressive acquirers of temporary labor.”

Ford Hiring

Ford Motor Co. is one manufacturer that intends to step up
hiring, even as today’s report showed employment at factories
stagnated in April after the addition of 2,000 in March.

Ford, reacting to U.S. pickup sales that have gained
momentum for almost two years straight, said yesterday it plans
to hire workers at an F-150 truck factory to boost output. The
No. 2 U.S. automaker will add more than 2,000 employees at its
plant in Claycomo, Missouri, for the extra pickup production and
to begin building the Transit commercial van in mid-2014.

“It’s a huge vote of confidence in our truck, our sales
and what’s going on in the industry overall and the economy,”
Joe Hinrichs, Ford’s president of the Americas, said in a
telephone interview. “We wouldn’t be hiring if we didn’t think
it was going to last. It is a strong indication of how we feel
about our continued leadership in the segment.”

Fed Concern

Officials at the Fed are still looking for greater progress
in reducing unemployment. The central bankers said earlier this
week that they plan to maintain their $85 billion monthly pace
of bond purchases to spur growth and employment prospects and
are prepared to raise or lower the level of purchases as the
economic outlook evolves.

“Labor market conditions have shown some improvement in
recent months, on balance, but the unemployment rate remains
elevated,” the Fed said in a May 1 statement. While pointing
out that consumer spending, business investment and the housing
recovery have advanced, the central bankers said that “fiscal
policy is restraining economic growth.”

The monetary policy makers’ concern stems from the planned
budget reductions, known as sequestration, that commenced on
March 1. The Congressional Budget Office has estimated the cuts
will trim the nation’s gross domestic product by 0.6 percentage
point in 2013.

Executives at staffing firm Kforce Inc. said they saw the
impacts of sequestration rippling through their business. The
Tampa, Florida-based company earlier this week reported first-quarter revenues that were lower than a year ago.

“The sequestration was an issue to us,” Chief Executive
Officer David Dunkel said during an April 30 earnings call.
“Frankly, we didn’t expect to see the ripple effect to
commercial clients that we’re doing business with, with other
government clients, subcontract business, and even state and
local business.”